ODAC Newsletter - 30 May 2008

Welcome to the ODAC Newsletter, a weekly roundup from the Oil Depletion Analysis Centre, the UK registered charity dedicated to raising awareness of peak oil.

$130 oil, lorry drivers’ protests and a massive power cut, this was the week that the British government began to panic in public about energy – as well it might, given the state of British energy policy.

Gordon Brown wrote an article blaming the soaring oil price on “technical, financial and political” factors, while missing the most important from his list: “geological”. He and Alistair Darling compounded the impression of men who really don’t get it by hijacking a meeting of UK Oil & Gas trade group and pleading with the assembled oil men to pump harder. Every little helps they cried, while making much song and dance of a paltry tax incentive on some small fields that will raise output by just 20,000 barrels per day, and while other ministers hinted strongly at a flip-flop on fuel and vehicle excise duty in the offing.

George Monbiot’s open letter to King Abdullah of Saudi Arabia highlighted the gear-grinding internal contradictions of policy, while ODAC trustee David Strahan explained why our leaders are so conflicted: the alternative to blaming OPEC is to get serious about cutting demand, which they are evidently too terrified to do. The Environmental Audit Committee this week recommended the adoption of personal carbon trading as a much better way of cutting demand than high taxes, but both Labour and the Tories dismissed it, in identical terms, as “an idea whose time has not yet come”.

The story of the International Energy Agency’s reassessment of the global oil resource, and growing hints that they will conclude it is much smaller than their previous forecasts have assumed, must by now be high on the government’s radar. Broken by lastoilshock.com last year, the story subsequently appeared in the Financial Times, the Wall St Journal and last week in the Observer. Perhaps it is in this light that we should consider a less widely covered aspect of British energy policy – that the government has claimed an extension of territorial waters around Ascension Island, St Helena and Tristan da Cunha. A Foreign Office official told the Telegraph, apparently with a straight face, that the move was intended to "protect the environment".

Meanwhile countries with a claim on Arctic hydrocarbons agreed to make nice and abide by the UN law of the sea rather than creating some new institution, while they gather information to settle the competing claims. Let’s see how long the harmony lasts.

Elsewhere there was a clutch of bearish developments on the oil supply: production at Cantarell continued to plunge; yet another pipeline attack in the Niger Delta; Indonesia pulled out of OPEC because its output has fallen so far that it is now an oil importer; the TNK-BP shareholder brawl got nasty; OPEC’s president ruled out an output hike; and Morgan Stanley said Brent crude could easily hit $150.

In another sign of desperation ministers claimed repeatedly this week that plans for future diversification out of oil would moderate the current price. Gordon Brown grabbed a headline by restating the position previously set out by Business Secretary John Hutton that Britain should not just replace but expand its nuclear fleet. Given the lead-times, can they seriously believe these issues are connected and that one will help the other in the short term? If so we really are in trouble.

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